During a recent panel discussion at the World Economic Forum in Davos on January 23, 2025, Paul Chan, Hong Kong's financial chief, defended the city's long-standing currency peg to the U.S. dollar. He emphasized that this peg, in place since 1983, has been crucial for maintaining stability in Hong Kong's business environment, especially in light of anticipated volatility stemming from the Trump presidency [e07495b9].
Chan pointed out that the absence of exchange controls in Hong Kong allows for the free movement of money, which he believes is essential for fostering economic growth. He cited a recent survey indicating that approximately one-third of U.S. companies operating in Hong Kong are optimistic about future expansion, with a notable 10% increase in American firms since 2023 [e07495b9].
This discussion on currency stability comes at a time when global economic leaders are increasingly concerned about the future of the U.S. dollar as the dominant reserve currency. Experts at the forum, including Harvard Professor Kenneth Rogoff and University of Chicago Professor Raghuram G. Rajan, acknowledged the challenges facing the dollar, yet they remain optimistic about its continued dominance [65795239].
Rogoff highlighted the unpredictability of exchange rates, while Rajan pointed to the resilience of the U.S. economy despite Federal Reserve actions. These insights align with Chan's emphasis on the importance of stability in the face of economic uncertainties [65795239].
As global discussions on de-dollarization gain momentum, with countries exploring alternatives to the dollar, Chan's defense of the peg underscores Hong Kong's commitment to maintaining a stable economic environment. The dollar's share of allocated foreign reserves has been gradually declining, now at 58%, raising questions about its future as the primary global currency [514e277a].
In conclusion, while the future of the dollar remains uncertain, Chan's remarks at Davos reflect a broader recognition of the need for stability in currency policies, particularly for economies like Hong Kong that rely heavily on international trade and investment [e07495b9][42785c7e].